Ask a Planner

By Jason Heath, CFP on July 14, 2025
Estimated reading time: 7 minutes

By Jason Heath, CFP on July 14, 2025
Estimated reading time: 7 minutes

A MoneySense reader asks what tax and probate implications she might face if she inherits a rental property held only in her husband’s name.

My husband has a rental property in his name only. It was our primary residence for 9 years but we moved out 10 years ago. How can he transfer it to me after his death so I do not pay capital gain or probate or other taxes for that matter? He does have a will that I will inherit everything he owns. Is this enough?

–Iuliana

Most spouses own real estate jointly. Sometimes, though, a property is held only in one spouse’s name. For example:

It is unclear why the rental property is just in your husband’s name, Iuliana. But there are a number of considerations we can address.

When you have a principal residence and you change the use of the property, you are deemed to have sold it at the fair market value at that time and to have immediately reacquired it at the same value. This may result in a capital gain or loss in the year the use changes, and this may have tax implications.

If the property qualified as your principal residence for all the years of prior ownership, there will be no tax payable. So, converting it to a rental property would have established the adjusted cost base for future capital gains tax. That is, unless you filed a subsection 45(2) election with the Canada Revenue Agency (CRA) at the time to continue to designate the property as your principal residence for up to four additional years. You may even be able to file this election retroactively.

The conditions for this 45(2) election require that you cannot designate any other real estate as your principal residence during those years, and you cannot claim any capital cost allowance (CCA)—or depreciation—against the net rental income reported on your tax return. You must also remain a resident or deemed resident of Canada. A case where you might do this is when you move into a home that you are renting, but you keep a previous home as a rental property. It may not be........

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